Getting More Out of Your Training Dollar

Businesses in the U.S. spend in excess of $150 billion per year on employee learning, yet research indicates that 90 percent of its impact disappears within a year. Put another way, more than $135 billion is wasted annually on training that lasts barely longer than the sugar buzz from the session’s donuts.

Why are we all so ridiculously bad at this?

Mainly because many CEOs still view training as a cost center—hours and dollars invested in the same old binders, flipcharts, and PowerPoints, primarily to comply with regulatory or risk-management protocols. At many of these companies, training is limited to less than eight hours, per employee, per year.

Is it any wonder these bumbling companies don’t get better?

Yet other CEOs are increasing their investments in training—and turbocharging results. They’ve learned that the minimum threshold for world-class competitiveness, regardless of industry, is forty hours of training per employee, annually. High-performing companies train even more, typically requiring sixty hours per employee, per year; award-winning organizations may offer as much as one hundred or more hours of training annually.

Even more important than the amount of training these CEOs insist upon is how that training is managed, in three creative ways:

1. Train on more than technical skills:

Award-winning companies don’t limit training to job-specific skills. They also train on communication, teamwork, collaboration, improvement methodologies (Lean, Six Sigma, etc.), as well as financial literacy and business acumen. A great example is Federal Warehouse, a then-$35 million, shipping and warehousing concern in Illinois. The firm adopted open-book management, in which all financial data, decision-making, and rewards are shared with employees; the theory assumes that with the right information and incentives, you can delegate nearly all management to workers, because they’ll act like owners.

If only it were that simple.

One of the dirty little secrets of the American educational system is that we don’t teach economics, business, or finance very well. In fact, 43 percent of Americans can’t pass a rudimentary financial test with questions such as “Suppose you need to borrow $100. Which is the lower amount to pay back: $105 or $100 plus 3 percent?” But if you can’t calculate simple interest, how can you evaluate return on investment (ROI) or measure productivity improvements?

That’s why Federal Warehouse began starting each employee’s career with a week of education on open-book management and a detailed introduction to the company’s financial statements. This crash course in business was supported by monthly finance reviews with all employees and profit incentives.

Did it work? You judge: net income tripled in the program’s first year before rising another 30 percent the next year. All without new products, technologies, or investments.

2. Measure training’s impact:

Pal’s Sudden Service is a regional fast-food chain built on speed, accuracy, and talent. Based in Tennessee, Pal’s is known for tasty burgers, fries, and shakes delivered with insane quickness. How fast?

• You drive up, order directly at a window on one side of building (average 18 seconds per transaction).

• Then you steer to a window on the other side, where a different employee hands you a meal (average 12 seconds per transaction).

Best of all, you get exactly what you ordered, because Pal’s hands out the wrong food only once in every 3,600 orders—an error rate 10 times better than the average fast-food chain.  How? By training every new Pal’s employee for 120 hours of training, certifying him or her for each job they’ll perform. Most importantly, training never ends; at every restaurant, on every shift, a computer randomly selects up to four employees to take a re-certification quiz. Pass, and all is well. Fail, and the worker heads back to training.

“People go out of calibration just like machines go out of calibration,” explained Pal’s CEO Thomas Crosby. “If you want people to succeed, you have to be willing to teach them.”

3. Train for when things go wrong:

Nothing matters more than how well our employees are trained during what McKinsey & Company calls the “moment of truth.” This is when there’s an opportunity for something to go right with a customer, or after something goes drastically wrong. A study in Europe found that 87 percent of bank customers who had positive experiences during moments of truth (a check put on hold, a bank error, receiving financial advice) actually increased their share of wallet with the bank. Conversely, 72 percent of customers who had negative experiences downsized their relationships with the bank.

In these moments, the difference isn’t what happens to the customer, but how he or she is treated.  The only way that we create a difference in that moment is by the investment we make in training. How our employees treat that angry or frightened customer—for good or ill— will determine our relationship, and our bottom line, for years.

How are you investing for the future?

Read more: Want Satisfied Customers? Spend Time with Them

John R Brandt: John R. Brandt is CEO and founder of The MPI Group, and the former publisher and editor-in-chief of both Chief Executive and IndustryWeek. He is the author of NINCOMPOOPERY: Why Your Customers Hate You—and How to Fix It (HarperCollins, 2019).